I just played it through on my machine (new iMac 21") and it looks fine. No jaggies or hesitation. (1080p)

My machine has a discrete graphics controller with 512 MB of VRAM and you're running an Intel HD 3000, but that shouldn't matter since your GPU should easily handle that video. Try loading other videos from different sources and see what the results are.

Well, when I play other 1080p YouTube vids it plays fine. Just that particular vid that's giving me a problem.